Stockbrokers told to proactively engage local investors before going after foreigners

Instead of passively waiting for foreign investors to come, the stockbrokers at the Colombo bourse have been asked to proactively engage local investors as there is huge potential for share valuations to increase in the near future.

"It's now time for you to go across the country and explain these opportunities to potential Sri Lankan investors and encourage them to enter this market. Don't passively wait for the foreign investors to return, but proactively engage the local investors," State Minister of Money & Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal said.

Cabraal made these remarks when he addressed the members of the Colombo Stock Brokers Association (CSBA) at the Finance Ministry last Friday.

He also expressed confident of local investors who acquire shares on the Colombo Stock Exchange (CSE) now would make substantial capital gains very soon.

Cabraal explained that the Colombo Stock Exchange's All Share Price Index (ASPI) was at around 7, 300 points by end-December 2014 and the market capitalisation was around US $ 25 billion. However, the ASPI has now shrunk to about 5, 300 points with the market capitalisation down to about US $ 12.5 billion, despite most listed corporate reporting reasonable profits over the past 5 years with improved balance sheets.

In this backdrop, Cabraal pointed out that ASPI today should be at a much higher value and the market capitalisation too should be substantially higher.

“…it is clear that there is a huge potential for the valuations of the shares to increase in the near future since confidence is returning to the markets and economic activity is likely to pick up in the near term,” he remarked. 

Cabraal further pointed out that the money markets are quite liquid now and that the total deposits in banks and finance companies exceed Rs.10,000 billion. 

He, therefore, urged stockbrokers to try to collectively attract at least 1 percent of such deposits, which would amount to a sizable Rs.100 billion, and that it would be quite possible to do so in the current low-interest regime. 

Cabraal noted that such an investment wave would be a huge boost to the stock market, which would also provide a very sound platform for the share investors to take up some useful positions in the stock market as well.

"In that way, local investors could gain from the current depressed market, particularly in light of the reduced interest rates". He asserted that those who invest now will definitely be at an advantage over those who invest later.